Key Points

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all recently hit new highs, fueled by the AI revolution and an estimated addressable market of $15.7 trillion by 2030.
Though AI is Wall Street's lead catalyst, share buybacks, which notably increased following the signing of Donald Trump's Tax Cuts and Jobs Act into law, have been instrumental in sending the stock market higher.
The AI data center build-out is siphoning away capital that would normally be used for share repurchases - and this could have serious consequences for Wall Street.

Despite a volatile March, the stock market appears to be well on its way to another banner year. Last week, the ageless Dow Jones Industrial Average, broad-based S&P 500, and innovation-inspired Nasdaq Composite all roared to record-closing highs - an occurrence that's become commonplace under President Donald Trump.

The Dow, S&P 500, and Nasdaq Composite rallied 57%, 70%, and 142%, respectively, during Trump's first term, and they've gained 17%, 26%, and 37% since the president's second, non-consecutive term began on Jan. 20, 2025 (as of the closing bell on June 3, 2026).

President Trump delivering remarks. Image source: Official White House Photo by Daniel Torok.

At the heart of this rally is the artificial intelligence (AI) revolution. Empowering software and systems with the tools to make split-second, autonomous decisions is a $15.7 trillion addressable opportunity by 2030, according to PwC's analysts.

But AI isn't the only trillion-dollar catalyst fueling the Trump bull market. Though AI offers jaw-dropping long-term growth potential, it's choking off a trillion-dollar catalyst that's been foundational to this rally.

President Trump facilitated this trillion-dollar investment

While Donald Trump's fingerprints aren't on every aspect of the stock market's historic rally - the evolution of AI was occurring well before his second term - his flagship tax and spending policies have certainly had a tangible impact.

In particular, the Tax Cuts and Jobs Act (TCJA), signed into law in December 2017 by Trump, paved the way for a greater than $1 trillion investment last year by S&P 500 companies.

Although the TCJA established several tax breaks, the most notable was the permanent reduction in the peak marginal corporate income tax rate. It slashed the corporate tax rate from 35% to just 21% - the lowest level since 1939.

S&P 500 buybacks were $249.0b in 3Q25, up 6.2% from 2Q25 and up 9.9% from 3Q24; top 20 S&P 500 companies accounted for 49.5% of 3Q25 share repurchases, down from 51.3% in 2Q25.

Enabling companies to retain more of their earnings can increase hiring, acquisitions, and spending on innovation. However, the biggest post-TCJA shift was a sizable increase in share repurchases by America's largest and most influential companies.

Before 2018 (i.e., when the TCJA went into effect), S&P 500 companies averaged roughly $100 billion to $150 billion in quarterly share buybacks. Over the trailing 12-month period, ending in September 2025, S&P 500 companies had spent $1.02 trillion repurchasing their shares. According to research from The Motley Fool, S&P 500 businesses may have spent up to $1.2 trillion on buybacks last year.

For companies with steady or growing net income, share buybacks can increase earnings per share (EPS), thereby making them more fundamentally attractive to value-seeking investors. This trillion-dollar annual investment has played a foundational role in lifting corporate EPS and powering the Trump bull market higher.

Image source: Getty Images.

The AI data center build-out is cannibalizing capital that had been directed at buybacks

Several of Wall Street's most influential AI businesses have deployed a small fortune repurchasing their shares. Apple has spent approximately $853 billion to retire more than 44% of its outstanding shares since the start of 2013. Meanwhile, Google parent Alphabet invested $346 billion into buybacks from the start of 2016 through the end of 2025.

But priorities for many of Wall Street's largest companies have shifted dramatically in recent quarters. The capital needed to fuel the AI data center build-out has to come from somewhere, with buybacks serving as the sacrificial lamb.

During their most recently reported quarter, neither Meta Platforms nor Alphabet spent a dime on buybacks. Apple, which has the largest share repurchase program on Wall Street, bought back only $12.29 billion of its stock in the fiscal second quarter (ended March 28). For context, Apple has been averaging between $23 billion and $25 billion in buybacks per quarter.

Combined buybacks by Amazon, Alphabet, Microsoft, Meta, and Oracle fell to $12.6 billion in Q4 2025, the lowest in 7 years. This marks the 3rd quarterly decline, a -70% drop from the 2021 peak.

To make matters worse, Alphabet announced plans to sell $84.75 billion in stock, effectively undoing years of buybacks to fund its AI infrastructure ambitions.

It would appear that share buybacks in 2026 are going to plummet from 2025's record high. While a strong argument can be made that deploying this capital for growth purposes makes sense, it nevertheless limits what's been a foundational catalyst for the Trump bull market.

A step back in share repurchases should also lead to a smaller EPS boost for many of America's most influential businesses in 2026 (and beyond). This is a particularly noteworthy consequence of reduced buybacks, as the stock market is currently trading at its second-priciest valuation in history. Whereas the S&P 500's Shiller Price-to-Earnings Ratio has averaged approximately 17.4 over the last 155 years, it's within a stone's throw of topping 43! This is a stock market that has absolutely no margin for error.

Additionally, every game-changing technology since the advent and proliferation of the internet has experienced an early stage bubble-bursting event. With nothing to suggest that AI will avoid this fate - businesses are nowhere close to optimizing AI solutions - reduced share buybacks can further expose unrealistic valuations and investor expectations.

Yes, the AI data center build-out is exciting... but it comes at a high cost to the Trump bull market.

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Sean Williams has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, and Meta Platforms. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.